Taking an asset-liability management approach to private wealth management
While the private banking industry is in general relatively well equipped on the tax planning side, with tools that can allow private bankers to analyse the situation of high net worth individuals operating offshore or in multiple tax jurisdictions, the software packages used on the financial simulation side often suffer from significant limitations and cannot satisfy the needs of a sophisticated clientele.
Most financial software packages used by private bankers to generate asset allocation recommendations rely on single-period mean variance asset portfolio optimisation, a tactic that, for at least two reasons, cannot lead to proper strategic allocation. Optimisation parameters (expected returns, volatilities and correlations) are defined as constant across time, a practice which is contradicted by empirical observation and does not make it possible to take into account the length of the
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